ANNOUNCEMENT OF RESULTS FOR 2011

Transcription

1 Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. (Stock Code: 902) ANNOUNCEMENT OF RESULTS FOR 2011 Power generation by domestic power plants: Consolidated operating revenue: Net profit attributable to equity holders of the Company: Earnings per share: Proposed dividend: billion kwh RMB billion RMB1.181 billion RMB0.08 RMB0.05 per ordinary share (inclusive of tax) SUMMARY OF OPERATING RESULTS The Board of Directors (the Board ) of Huaneng Power International, Inc. (the Company or Huaneng International ) hereby announces the audited operating results of the Company and its subsidiaries for the year ended 31 December For the twelve months ended 31 December 2011, the Company recorded operating revenue of RMB billion, representing an increase of 27.90% compared to the same period of the previous year, and net profit attributable to equity holders of the Company of RMB1.181 billion, representing a decrease of 64.74% as compared with the same period of Earnings per share amounted to RMB0.08. The Board is satisfied with the Company s results last year. The Board of the Company proposed to declare a cash dividend of RMB0.05 (inclusive of tax) for each ordinary share of the Company held by shareholders. Details of the operating results are set out in the financial information.

2 BUSINESS REVIEW OF YEAR 2011 In 2011, the Company had attained new progress on many aspects including power generation, energy saving and environmental protection, project development and overseas operation. In respect of domestic operations, despite the unfavourable conditions from sustained increases in fuel prices and Renminbi lending rates, the management and employees of the Company seized opportunities, worked diligently to tackle the adversities, and fulfilled the duties of providing sufficient, reliable and green energy to the society. In respect of overseas operation, the operating results of Tuas Power in Singapore in 2011 improved significantly, thus making important contributions to the overall profit of the Company. 1. Operating Results For the twelve months ended 31 December 2011, the Company recorded operating revenue of RMB billion, representing an increase of 27.90% compared to the same period last year, realized net profit attributable to equity holders of the Company of RMB1.181 billion, representing a decrease of 64.74% as compared with the same period of last year. Earnings per share was RMB0.08. As at the end of 2011, net assets per share of the Company amounted to RMB3.62, representing a decrease of 5.48% compared to the same period last year. The Audit Committee of the Company convened a meeting on 19 March 2012 and reviewed the 2011 annual results of the Company. 2. Power Generation In 2011, the Company grasped the opportunities emerge during the peak electricity consumption period of the country, and explored the market through various channels, thus expanding our market shares. Through optimizing the examination and maintenance work of our generation units and the power generation structure, the Company has increased power generation in an efficient way. At the same time, with a number of new generating units that have commenced operation, and the completion of the acquisition of Zhanhua Co-generation and Diandong Energy, 2

3 market share of the Company has been expanded. As a result, total power generated by the Company s operating power plants in China amounted to billion kwh, representing an increase of 22.03% compared to the same period last year. The electricity sold amounted to billion kwh, representing an increase of 22.30% compared to the same period last year. In 2011, the annual average utilization hours of the Company s domestic coal-fired generating units reached 5,552 hours, representing an increase of 133 hours compared to the same period last year and 258 hours higher than the average utilization hours of the coal-fired generating units in China. 3. Cost Control Fuel cost is the major integral part of the operation cost of the Company. In 2011, the Company purchased a total of 145 million tons of natural coal. The Company continued to enhance the communication and coordination with major contracted suppliers, leverage on it to actively explore new sources and supply channels for coal, and has effectively secured our coal supply. In addition, by capitalizing on the internal resources within China Huaneng Group ( Huaneng Group ), the Company has increased its imports of coal, which has helped to control the coal purchasing cost effectively. The fuel cost per unit of power sold of the Company s domestic power plants was RMB per MWh, representing an increase of 9.24% compared to last year. 4. Energy Saving and Environmental Protection The Company has always placed energy saving and environmental protection work as its utmost priority. In 2011, the Company led the industry in terms of technical and economic indicators and energy consumption indicator. The average equivalent availability ratio of the Company s domestic power plants was 94.23%, and its weighted average house consumption rate was 5.03%. The Company s average coal consumption rate for the power generated by coal-fired generating units was grams/kwh, 1.14 grams/kwh lower than that of the same period last year. The Company s average coal consumption rate for power sold was grams/kwh, representing a decrease of 3.49 grams/kwh from

4 In 2011, the Company kept increasing its effort in implementing, managing, updating and modifying our environmental friendly equipment, all power plants of the Company have met the pollutants emission standard throughout the year. 5. Project Development Construction of power generating projects of the Company progressed smoothly. In 2011, the controlled generation capacity of the newly commissioned coal-fired, combined cycle, wind turbine and hydro-power generating units of the Company was 3,120 MW, 923 MW, MW and 20 MW, respectively. The above has increased the total controlled generating capacity and equity-based generation capacity of the Company by 4,761.5 MW and 3,149.4 MW, respectively. The installed generating capacity of the Company also changed as a result of the change of installed generating capacity of some power generation companies invested by the Company and the Company s technological improvement to existing generating units and close-down of small generating units. As of 20 March 2012, the Company s controlled and equity-based generation capacity was 60,375 MW and 55,350 MW, respectively. 4

5 6. Overseas Operation In 2011, Tuas Power Ltd. ( Tuas Power ), a wholly owned company of the Company in Singapore, seized opportunities and continued to maintain stable operation of the generating units, and improved its operating results significantly. Its market share in the power generating market of Singapore for 2011 was 27.12%, representing an increase of 1.91 percentage point compared to the corresponding period last year. Singapore businesses realized a net profit attributable to the Company of RMB1.282 billion for the whole year, representing an increase of 85.45% as compared to the corresponding period last year. In 2011, the Company further secured its market position and was widely recognized by the market. Given its outstanding performance, the Company was awarded the Most Popular Listed Company among Investors in Hong Kong and China of the 2011 Golden Bauhinia Awards in China securities market; the Company was again named in the Top 500 Chinese Listed Companies of Fortune magazine, and ranked 29th on the list. In addition, the Company ranked 57th on the Top 100 Chinese Listed Companies in Besides, the Company was listed on the Platts Top 250 Global Energy Listed Companies for three years consecutively, with an overall ranking of 127th and ranked 4th in the category of global independent power producers and energy traders. PROSPECTS FOR 2012 General working direction for 2012 set by the Central Economic Work Conference is to maintain steady and health growth, it stressed that progressive fiscal policy and sound monetary policy are still needed to be implemented, the economy of the country will develop in the expected direction set by the macro-economic control measures. However, as global economic environment is still harsh yet complicated, together with the pressure of slowing down in economic growth and price inflation in China, the unstable and uncertain factors in the operation of the macro-economy still persist. 5

6 On aspect of production and operation, the increase in demand for electricity nationwide and the commercial operation of the newly constructed generating units of the Company provide opportunities for the Company to increase the growth of power production and utilization hours. The upward adjustments to tariff by the State and the measures to restrict coal prices last year had greatly improved the Company s operation environment and increased the profitability. However, following the adjustments to the economic structure of the State and industrial upgrading, the growth in the Company s power production will have certain impacts as the electricity consumption growth rate in eastern China region and southern China region (in which the Company has majority of its power plants) will be lower than those in central and western regions. At the same time, in the process of electricity reform, price mechanism reform is relatively lagging behind. This will also bring an uncertainty to the Company s operation. On aspect of fuel procurement, the moderately easing of the coal supply nation-wide in 2012 will create a favourable condition for the Company to control fuel costs. However, affected by the increased centralization of the coal industry, domestic coal prices may still run high, thereby bringing about a new pressure on the Company s ability to preserve a stable supply of coal and to reduce fuel costs. On aspect of capital market, as the People s Bank lowered its deposit-taking financial institutions deposit reserve rate by 0.50 percentage point in February 2012, the market liquidity will be further increased and the tension in the capital market will be eased. The increase in market liquidity will be favourable for the Company to continue the innovative financial instruments, to fully utilize the advantages of direct financing, and to strive to control the costs of finance on basis of ensuring capital needs. However, given the requirements for the loan-to-deposit ratio, capital adequacy ratio and the deposit reserve ratio, the prevailing general capability for credit financing by banks is limited, and the capital from the credit market is still tight. At the same time, the relatively high lending interest rates and the adjustments to the credit structure of part of the banks will also pose new challenges to the financing work of the Company. 6

7 The main task of the Company in 2012 is to focus on enhancing economic efficiency, and through which to make our power business become stronger and perform better. The Company will remain sensitive to the changes in the power market, and strive to explore the market and capture every market opportunities. Besides, the Company will improve the power structure and optimize the timing for every project, with an aim to enhance the benefits from power generation, strive to make the annual domestic generating units utilization hours reach 5,600 hours, thus enabling the Company s domestic power plants to achieve an annual power generation of 340 billion kwh. Another task for the Company is to impose more stringent control of fuel costs, and make endeavors to explore new coal sources and supply channels. The major direction for the Company is to maintain the position of its core business, adjust power structure, enhance efficiency and risk control, which will be achieved through strengthening capital management, enhancing financial analysis ability, and improving risk controls and cost controls. In respect of the development for 2012 and the years after, the Company will gradually accelerate the transformation of its development mode for further developments, and further consolidate and optimize its geographical coverage. The Company will fine tune the development plan for thermal power generating, and aggressively invest in development and construction of power projects in gas, wind power, hydro power, aiming to enhance the quality and efficiency of the development. 7

8 OPERATING AND FINANCIAL REVIEWS AND PROSPECTS Management s Discussion and Analysis (Prepared under International Financial Reporting Standards ( IFRS )) Overview The principal activities of the Company are investment, construction, operation and management of power plants. The Company provides stable and reliable electricity supply to customers through grid operators where the operating plants are located. The Company is committed to scientific development, increasing economic efficiency, enhancing returns for shareholders, conserving resources and protecting the environment. The Company also attaches importance to social responsibilities and makes active efforts to build a harmonious society. Since its incorporation, the Company has continued to expand its operating scale, thus increasing its operating revenue. The Company has also been the industry leader in the level of competitiveness, effectiveness of resources utilization and environmental protection. Currently, the Company is one of the largest listed power producers in China. Its power generation operations are widely located, covering the Northeast China Grid, the Northern China Grid, the Northwest China Grid, the Eastern China Grid, the Central China Grid, the Southern China Grid, and the overseas market in Singapore. Looking back in 2011, with strong support of all shareholders and concerted efforts of the employees, as well as commitment to increasing economic benefits based on scientific and improved development, the Company has actively dealt with the changes in power, coal and capital markets, made focused efforts to generate profit, and implemented innovative initiatives to maintain leading market position. The Company s safely production environment is generally stable and the main technical and economic indicators are maintained as a leader in the industry. The Company achieved effective market expansions and explorations while actively pursuing policy supports, realized stable fuels supply and further streamlined fuel supply structure. It has completed construction projects as scheduled and made marked progress in utilization of clean energies. In the meantime, the Company continued to diligently fulfill its social responsibilities to provide sufficient, reliable and clean electric power and achieved new progress on energy saving, project construction, generating units renovation and environmental protection. 8

9 A. Operating Results operating results The Company completed acquisitions of Diandong Energy, Diandong Yuwang, Luoyuanwan Harbor, Luoyuanwan Pier, Ludao Pier, Suzihe Hydropower and Enshi Hydropower in These seven companies are consolidated into the consolidated financial statements for the year ended 31 December 2011 of the Company. The power generated of the Company s domestic power plants for the year ended 31 December 2011 was listed below (in billion kwh): Power Power generation generation Power Plant in 2011 in 2010 Change Dalian % Fuzhou % Nantong % Shang an % Shidongkou II % Dezhou % Shidongkou I % Shantou Coal-fired % Dandong % Nanjing % Jining % Changxing Weihai % Taicang % Huaiyin % Yuhuan % Xindian % Yushe % Qinbei % 9

10 Power Power generation generation Power Plant in 2011 in 2010 Change Luohuang % Shanghai CCGT % Yueyang % Yingkou % Jinggangshan % Pingliang % Jinling CCGT % Haimen % Rizhao Phase II % Yingkou Co-generation % Beijing Co-generation % Yangliuqing Co-generation % Qidong Wind Power % Shidongkou Generation % Jinling Coal-fired % Huade Wind Power % Zhanhua Co-generation % Diandong Energy % Diandong Yuwang % Wafangdian Wind Power Enshi Hydropower Total % 1. Changxing Plant in Zhejiang Province has been closed. 2. Zhanhua Co-generation has been included in consolidation scope of the Company since December Its power generation in 2010 listed above represented its power generation in December The power generation of Diandong Energy and Diandong Yuwang for 2010 are for reference only and not accounted in the total power generation of the Company for

11 4. Enshi Hydropower in Hubei Province has been included in consolidation scope of the Company since 30 December In 2011, the power generated by Singapore operations accounted for 27.12% of the total power generated in Singapore, increased by 1.91 percentage points from In respect of the tariff, the average tariff of domestic power plants for the year ended 31 December 2011 was RMB per MWh, an increase of RMB8.44 per MWh from the year ended 31 December In respect of fuel supply and cost controls, the increase of fuel price and power generation contributed to an increased fuel cost of the Company. Compared to last year, the unit fuel cost of power sold of the Company s domestic power plants increased by 9.24% to RMB per MWh. Combining the forgoing factors, the operating revenue of the Company and its subsidiaries for the year ended 31 December 2011 increased by 27.90% from last year. The Company and its subsidiaries recorded a net profit attributable to equity holders of the Company of RMB1.181 billion, decreased by 64.74% compared to the net profit attributable to equity holders of the Company of RMB3.348 billion for the year ended 31 December For the year ended 31 December 2011, the profit attributable to equity holders of the Company from domestic operations was RMB billion, decreased by RMB2.758 billion compared to last year. The decrease was primarily due to the increase in fuel price in China and the increase of RMB borrowing interest rates. The increase of fuel price was mainly because of the increase of coal demand in the market and the increase of coal price. The increase of RMB borrowing interest rates was resultant from consecutive raise of benchmark lending interest rates by the People s Bank of China (PBOC) during 2010 and

12 For the year ended 31 December 2011, the profit attributable to equity holders of the Company from Singapore operations was RMB1.282 billion, increased by 85.45% compared to last year. This is mainly because the constrained supply of natural gas in Singapore contributed to higher demand for electricity and therefore temporary higher electricity price, result in higher profit derived compare to last year. 2. Comparative Analysis of Operating Results 2.1 Operating revenue and tax and levies on operation Operating revenue mainly consists of revenue from power sold. For the year ended 31 December 2011, the consolidated operating revenue of the Company and its subsidiaries amounted to RMB billion, representing a 27.90% increase from RMB billion for the year ended 31 December The increase in operating revenue of domestic operations was primarily attributable to increased power generation and expanded operations. The operation of new generating units contributed RMB billion to the increase. The operating revenue of the Singapore operations increased by RMB6.195 billion for the year ended 31 December 2011 from last year. This is mainly because the constrained supply of natural gas in Singapore contributed to higher demand for electricity and therefore temporary higher electricity price. Average tariff rate (VAT inclusive) (RMB/MWh) Power Plant Change Dalian % Fuzhou % Nantong % Shang an % Shantou Coal-fired % Dandong % Shidongkou II % 12

13 Average tariff rate (VAT inclusive) (RMB/MWh) Power Plant Change Nanjing % Dezhou % Weihai % Jining % Shidongkou I % Taicang I % Changxing N/A N/A Huaiyin II % Yushe % Yingkou % Jinggangshan % Luohuang % Yueyang % Qinbei % Pingliang % Yuhuan % Taicang II % Xindian II % Haimen % Rizhao Phase II % Yingkou Co-generation % Beijing Co-generation % Yangliuqing Co-generation % Shidongkou Generation % Zhanhua Co-generation % Diandong Energy N/A N/A Diandong Yuwang N/A N/A Shanghai CCGT % Nanjing Jinling Power % Tuas Power 1, % Qidong Wind Power % Huade Wind Power % Wafangdian Wind Power N/A N/A Enshi Hydropower N/A N/A 13

14 Tax and levies on operations mainly consist of taxes associated with valueadded tax surcharges. According to relevant administrative regulations, these surcharges include City Construction Tax and Education Surcharges calculated at prescribed percentages on the amounts of the value-added tax paid. These surcharges also applied to direct foreign investment entities that have been approved by the government since December 2010, certain power plants of the Company are subject to these taxes since then. For the year ended 31 December 2011, the taxes and levies on operations amounted to RMB484 million. 2.2 Operating expenses For the year ended 31 December 2011, the total operating expenses of the Company and its subsidiaries was RMB billion, representing a 29.98% increase from RMB billion for the year ended 31 December The increase of operating expenses of domestic operations was primarily attributable to the increase in fuel prices, expanded operations and the increase of power generation. The operation of new generating units contributed RMB billion to the increase in operating expenses. The operating expenses of the Singapore operations increased by RMB5.433 billion. This is mainly because of the rise of the purchase price for natural gas and oil in Singapore due to global oil price increase, increase of fuel costs caused by the increase of power generation, and increase of power purchase costs as a result of the increase of retail electricity sold Fuel costs Fuel costs represent the majority of the operating expense for the Company and its subsidiaries. For the year ended 31 December 2011, fuel costs of the Company and its subsidiaries increased by 33.37% to RMB billion from RMB billion for the year ended 31 December The increase of fuel costs of domestic power plants was primarily attributable to the increase of fuel price and the increase of power generation. The operation of new generating units accounted for RMB billion of the increase in fuel costs. 14

15 For the year ended 31 December 2011, the average price (excluding tax) of natural fuel coal was RMB per ton, representing a 6.09% increase from RMB per ton for the year ended 31 December Due to the increase in coal price, the fuel cost per unit of power sold by the Company s domestic power plant increased by 9.24% to RMB per MWh. Fuel costs of Singapore operations increased by RMB2.186 billion for the year ended 31 December 2011 from last year, which is mainly attributable to the rise of the purchase price for natural gas and oil in Singapore due to global oil price increase, as well as the increase of power generation Maintenance For the year ended 31 December 2011, the maintenance expenses of the Company and its subsidiaries amounted to RMB2.529 billion, representing a 9.85% increase from RMB2.302 billion for the year ended 31 December The operation of new generating units accounted for RMB234 million of the increase. The maintenance expenses of the Singapore operations increased by RMB40 million Depreciation For the year ended 31 December 2011, depreciation expenses of the Company and its subsidiaries increased by 13.59% to RMB billion from RMB billion for the year ended 31 December The increase was primarily attributable to the Company s expansion. 15

16 2.2.4 Labor Labor costs consist of salaries to employees and contributions payable to relevant state authorities for employees housing fund, medical insurance, pension and unemployment insurance, as well as training costs, etc. For the year ended 31 December 2011, the labor costs of the Company and its subsidiaries amounted to RMB4.622 billion, representing a 13.63% increase from RMB4.067 billion for the year ended 31 December This is mainly attributable to expanded operations and operation of new generation units of the Company. The operation of new generating units contributed RMB296 million of the increase. The labor costs of Singapore operations increased by RMB39 million Other operating expenses (including purchase of electricity and service fees paid to HIPDC) Other operating expenses include environmental protection expenses, land fee, insurance premiums, office expenses, amortization, and Tuas Power s purchase of electricity, etc. For the year ended 31 December 2011, other operating expenses (including purchase of electricity) of the Company and its subsidiaries was RMB billion, representing a 35.00% increase from RMB billion for the year ended 31 December The operation of new generating units contributed RMB588 million to the increase of other operating expenses. Other operating expenses of the Singapore operations increased by RMB3.124 billion, in which purchase of electricity increased by RMB3.056 billion, which was mainly caused by the increase of power purchase quantity and unit price. 16

17 2.3 Financial expenses Financial expenses consist of interest expense, bank charges and net exchange differences Interest expenses For the year ended 31 December 2011, the interest expenses of the Company and its subsidiaries were RMB7.736 billion, representing a 46.45% increase from RMB5.283 billion for the year ended 31 December The increase of interest expenses of domestic operations was primarily attributable to the increase of RMB borrowing interest rates, expensing instead of capitalizing interest upon commercial operation of new generating units, and expanded operations of the Company. The operation of new generation units accounted for RMB1.390 billion of the increase. The interest expenses of the Singapore operations increased by RMB54 million Net exchange differences and bank charges For the year ended 31 December 2011, the exchange gains less bank charges of the Company and its subsidiaries amounted to RMB76 million, decreased by RMB12 million compared to RMB88 million for the year ended 31 December For the year ended 31 December 2011, the exchange gain of the Company and its subsidiaries was RMB147 million, representing an increase of RMB13 million from RMB134 million for the year ended 31 December Net exchange differences and bank charges of the Singapore operations increased by RMB23 million. 17

18 2.4 Share of profit of associates/jointly controlled entities For the year ended 31 December 2011, the share of profit of associates/ jointly controlled entities was RMB704 million, a RMB135 million increase from RMB569 million for the year ended 31 December The increase was primarily due to the overall increase of the profit of associates and jointly controlled entities for the year ended 31 December 2011, which includes profit of RMB76 million from investment in Time Shipping. 2.5 Income tax expenses For the year ended 31 December 2011, the Company and its subsidiaries recorded an income tax expense of RMB869 million, representing an increase by 3.12% from RMB843 million for the year ended 31 December The income tax expense of domestic operations decreased by RMB109 million which was primarily due to the decrease of profit before income tax expense. The income tax expense of the Singapore operations increased by RMB136 million which was mainly attributable to the increase of profit before income tax expense. 2.6 Net profit, profit attributable to the equity holders of the Company and non-controlling interests For the year ended 31 December 2011, the Company and its subsidiaries achieved a net profit of RMB1.181 billion, representing a decrease of RMB2.140 billion from RMB3.321 billion for the year ended 31 December For the year ended 31 December 2011, the profit attributable to equity holders of the Company was RMB1.181 billion, representing a decrease of RMB2.167 billion from RMB3.348 billion for the year ended 31 December The profit attributable to equity holders of the Company from domestic operations decreased by RMB2.758 billion mainly because of increase of fuel price and increase of RMB borrowing interest rate. The profit attributable to equity holders of the Company from the Singapore operations increased by RMB591 million to RMB1.282 billion. This is mainly because the constrained supply of natural gas 18

19 in Singapore contributed to higher demand for electricity and therefore temporary higher electricity price, result in higher profit compare to last year. The profit attributable to non-controlling interest of the Company was RMB1 million for the year ended 31 December 2011 compared to loss of RMB27 million for the year ended 31 December This is mainly attributable to the fact that the companies in which the Company has low shareholding have performed better than those in which the Company has high shareholding. 2.7 Comparison of financial positions The assets and liabilities of the Company and its subsidiaries experienced significant change compared to that at beginning of the year, due to acquisition of power plants and continued investment in construction projects Comparison of asset items As at 31 December 2011, total assets of the Company and its subsidiaries were RMB billion, representing a 12.93% increase from RMB billion as at 31 December Noncurrent assets increased by 12.53% to RMB billion, primarily due to investment in construction projects and acquisitions. Current assets increased by 15.40% to RMB billion, primarily due to the increase of accounts receivable and inventories. As at 31 December 2011, total assets of the Singapore operations were RMB billion. Non-current assets increased by 6.61% to RMB billion, primarily attributable to investment in construction projects. Current assets increased by 24.63% to RMB6.537 billion, mainly because of increase in cash and cash equivalents, as a result of increase of profit. 19

20 2.7.2 Comparison of liability items As at 31 December 2011, total liabilities of the Company and its subsidiaries were RMB billion, representing a 19.54% increase from RMB billion as at 31 December 2010, primarily attributable to the increased borrowings for construction projects. Non-current liabilities of the Company and its subsidiaries mainly consist of bank loans and bonds. The increase of current liabilities was largely attributable to the increase of short-term bonds. As at 31 December 2011, interest-bearing debts of the Company and its subsidiaries totalled RMB billion. The interest-bearing debts consist of long-term loans (including those maturing within 1 year), long-term bonds (including those maturing within 1 year), short-term borrowings, and short-term bonds. The interest-bearing debts denominated in foreign currencies were RMB5.608 billion. As at 31 December 2011, total liabilities of the Singapore operations were RMB billion. Non-current liabilities were RMB billion decreased by RMB863 million from that as at the beginning of this year, which is mainly due to repayment of long-term borrowings. Current liabilities were RMB3.051 billion, increased by RMB1.406 billion from that as at the beginning of this year, which is principally because of increase in accounts payable Comparison of equity items Excluding the impact of profit and profit appropriations, the equity of the Company and its subsidiaries decreased at the end of the year compared to the beginning of the year, resulting from the post-tax impact of decreased fair value of available for sale investments held by the Company amounting to RMB234 million, the decrease of RMB409 million resulting from the post-tax impact of cash flow hedge of the domestic and Singapore operations, and the decrease of RMB664 million in currency translation differences as well as the increase of RMB38 million in non-controlling interests. 20

21 2.7.4 Major financial position ratios Current ratio Quick ratio Ratio of liability and shareholders equity Multiples of interest earned Formula of the financial ratios: Current ratio = balance of current assets as at the year end balance of current liabilities as at the year end Quick ratio = (balance of current assets as at the year end net inventories as at the year end) balance of current liabilities as at the year end Ratio of liabilities and shareholders equity = balance of liabilities as at the year end balance of shareholders equity (excluding non-controlling interests) as at year end Multiples of interest earned = (profit before income tax expense + interest expense) interest expenditure (inclusive of capitalized interest) The current ratio and quick ratio remained at relatively low level for the years ended 31 December 2011 and 2010, and decreased slightly at year end of 2011 from year end of The increase in the ratio of liabilities and shareholders equity at the year end of 2011 from the year end of 2010 was primarily due to the increase of borrowings for construction projects. The multiples of interest earned decreased, primarily attributable to the decrease of net profit for the year ended 31 December

22 B. Liquidity and Cash Resources 1. Liquidity For the year ended 31 December Change RMB billion RMB billion % Net cash provided by operating activities Net cash used in investing activities Net cash provided by financing activities Currency exchange (loss)/gain Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents as at the beginning of the year Cash and cash equivalents as at the end of the year For the year ended 31 December 2011, net cash provided by operating activities of the Company was RMB billion, of which RMB2.405 billion was from the operating activities in Singapore. The decrease in cash used in investing activities was mainly attributed to the decrease of expenditure on construction projects and acquisitions. The decrease in cash provided by financing activities was mainly attributable to issuance of shares last year and repayment of a number of borrowings matured during The Company expects to continue its focus on construction projects with large investment amount in

23 As at 31 December 2011, the cash and cash equivalents of the Company and its subsidiaries denominated in RMB, Singapore dollar, U.S. dollar and Japanese Yen were RMB4.973 billion, RMB2.936 billion, RMB0.644 billion, RMB0.2 million respectively. As at 31 December 2011, net current liabilities of the Company and its subsidiaries were approximately RMB billion. Based on the Company s proven financing record, readily available banking facilities and sound credibility, the Company believes it is able to duly repay outstanding debts, obtain longterm financing and secure funding necessary for its operations. The Company has also capitalized on its good credit record to make short-term borrowings at relatively lower interest rates, thus reducing its interest expenses. 2. Capital expenditure and cash resources 2.1 Capital expenditures on acquisitions On 31 December 2009, the Company entered into an Equity Interest Transfer Contract with Shandong Electric Power Corporation ( Shandong Power ) and Shandong Luneng Development Group Company Limited ( Luneng Development ), in accordance with which the Company agreed to acquire 100% equity interest in the registered capital of Diandong Energy, 100% equity interest in the registered capital of Diandong Yuwang, 100% equity interest in the registered capital of Zhanhua Co-generation, 100% equity interest in the registered capital of Jinlin Biological Power Generation, 60.25% equity interest in the registered capital of Luoyuanwan Harbour, 58.3% equity interest in the registered capital of Luoyuanwan Pier, 73.46% equity interest in the registered capital of Ludao Pier, 100% equity interest in the registered capital of Luneng Jiaonan Port, 53% equity interest in the registered capital of Luneng Sea Transportation, and development rights with respect to the preliminary stage projects (including Rizhao Lanshan MW coal-fired project and Luoyuanwan MW coal-fired project), all of which are owned by Shandong Power, and 39.75% equity interest in the registered capital of Luoyuanwan Harbour owned by Luneng Development. The aggregate consideration for the 23

24 above mentioned purchase of equity interests is RMB8.625 billion. As at 31 December 2011, the Company has paid the consideration in full. Following completion of acquisitions of Zhanhua Co-generation, Luneng Jiaonan Port, Luneng Sea Transportation and Jilin Biological Power Generation at the end of 2010, the Company completed acquisitios of the other five entities during the first half of On 30 September 2011, the Company entered into an agreement regarding transfer of equity interests of Enshi Maweigou Hydropower Development Co., Ltd. ( Enshi Hydropower ), according to which the Company acquired 100% of the equity interests in Enshi Hydropower with consideration of RMB227 million. Enshi Hydropower has been consolidated into the consolidated financial statements of the Company for the year ended 31 December Capital expenditure on construction and renovation projects The capital expenditures for the year ended 31 December 2011 were RMB billion, mainly for construction and renovation projects, including RMB1.109 billion for Haimen power project, RMB0.276 billion for Jinggangshan expansion project, RMB0.220 billion for Weihai expansion project, RMB1.101 billion for Qinbei expansion project, RMB0.490 billion for Yueyang expansion project, RMB0.354 billion for Pingliang expansion project, RMB0.330 billion for Jinling Coal-fired project, RMB0.604 billion for Shidongkou Generation project, RMB1.195 billion for Beijing Cogeneration expansion project, RMB0.247 billion for Qidong Wind Power project, RMB0.300 billion for Xiangqi Hydropower, RMB1.662 billion for Zuoquan Power project, RMB0.774 billion for Jiuquan Wind Power project, RMB0.503 billion for Diandong Energy project, RMB0.320 billion for Diandong Yuwang Project, and RMB0.217 billion for Qingdao Harbor project. The expenditures on construction projects in Singapore were RMB2.683 billion. The expenditures on other construction projects and renovation were RMB1.516 billion and RMB2.888 billion, respectively. 24

25 The above capital expenditures are sourced mainly from internal capital, cash flows provided by operating activities, and debt financing. The Company expects to have significant capital expenditures in the next few years. During the course, the Company will make active efforts to improve project planning process on commercially viable basis. The Company will also actively develop newly planned projects to pave the way for its long-term growth. The Company expects to finance the above capital expenditures through internal funding, cash flows provided by operating activities, and debt financing. The cash requirements, usage plans and cash resources of the Company for next two years are as following: (unit: RMB billion) Capital Cash Financing expenditure Contractual Financing resources costs and arrangement arrangement methods arrangements note on use Thermal power , Debts Internal cash Within the floating projects financing resources range of benchmark & bank loans, lending interest etc rates of PBOC Hydropower Debts Internal cash Within the floating projects financing resources range of & bank benchmark loans, etc lending interest rates of PBOC Wind power Debts Internal cash Within the floating projects financing resources range of & bank benchmark loans, etc lending interest rates of PBOC 25

26 Capital Cash Financing expenditure Contractual Financing resources costs and arrangement arrangement methods arrangements note on use Port projects Debts Internal cash Within the floating financing resources range of & bank benchmark loans, etc lending interest rates of PBOC Coal Debts Internal cash Within the floating mining financing resources range of projects & bank benchmark loans, etc lending interest rates of PBOC Technical , Debts Internal cash Within the floating renovation financing resources range of projects & bank benchmark loans, etc lending interest rates of PBOC 2.3 Cash resources and anticipated financing costs The Company expects to finance its capital expenditure and acquisition primarily from internal capital, cash flow from operating activities and debt financing. Good operating results and sound credit status provide the Company with strong financing capabilities. As at 31 December 2011, the Company and its subsidiaries had an undrawn banking facilities over RMB90 billion, granted by Bank of China, Construction Bank of China and China Development Bank. 26

27 The Company has completed the issuance of short-term bonds in two installments on 13 January 2011 and 19 September 2011, each at principal amount of RMB5 billion and nominal annual interest rate of 3.95% and 6.04%, respectively. Both of the bonds were denominated in RMB, issued at par value, and would mature in 365 days and 366 days, respectively. As at 31 December 2011, short-term loans of the Company and its subsidiaries totalled RMB billion (2010: RMB billion). Loans from banks were charged at interest rates ranging from 4.00% to 8.52% per annum (2010: 1.80% to 5.31%). Short-term bonds of the Company and its subsidiaries totalled RMB billion (2010: RMB5.070 billion). As at 31 December 2011, long-term loans of the Company and its subsidiaries totalled approximately RMB billion (2010: approximately RMB billion), consisting of loans denominated in RMB of approximately RMB billion (2010: approximately RMB billion), in US dollars of approximately US$0.779 billion (2010: approximately US$0.943 billion), and in Euro of approximately Euro 86 million (2010: approximately Euro 95 million). Included in the above U.S. dollar denominated borrowings were approximately US$743 million (2010: US$812 million) floating-rate borrowings. Singapore dollar denominated borrowings were all floating-rate borrowings. For the year ended 31 December 2011, long-term bank borrowings of the Company and its subsidiaries bore interest rates from 0.51% to 8.65% (2010: 0.51% to 6.97%) per annum. As at 31 December 2011, the borrowings for the Singapore operations were all long-term loans approximately in aggregate of RMB billion (2010: approximately RMB billion), including borrowings denominated in Singapore dollar in the amount of S$3.008 billion (2010: approximately S$3.064 billion) with interest rates from 1.94% to 4.25% per annum (2010: 2.15% to 4.25%), and borrowings denominated in U.S. dollar in the amount of US$1 million (2010: Nil) with interest rate of 2.74% per annum (2010: Nil). 27

28 The Company has completed the issuance of unsecured long-term debenture on 7 November 2011, at principal amount of RMB5 billion and an annual interest rate of 5.74%. The debenture was denominated in RMB, issued at par value, and would mature in five years. The Company and its subsidiaries will closely monitor any change in the exchange rate and interest rate markets and cautiously assess the currency rate and interest rate risks. Combining the current development of the power generation industry and the growth of the Company, the Company will make continuous efforts to not only meet cash requirements of daily operations, constructions and acquisitions, but also establish an optimal capital structure to minimize the cost of capital and manage financial risks through effective financial management activities, thus maintaining sustainable and stable returns to the shareholders. 2.4 Other financing requirements The objective of the Company is to bring long-term, steadily growing returns to shareholders. In line with this objective, the Company follows a proactive, stable and balanced dividend policy. In accordance with the profit appropriation plan of the board of directors of the Company (subject to the approval of the shareholders meeting), the Company expects to pay a cash dividend of approximately RMB703 million relating to the year

29 2.5 Maturity profile of loans (RMB billions) Maturity Profile Principal proposed to be repaid Interest proposed to be repaid Total Note: (1) This table is prepared according to the amounts in the contracts which have been entered into; (2) The amount of the principal to be repaid in 2012 is relatively large because this includes expected repayment of short-term loans and shortterm bonds. C. Trend Information According to the National Power Industry Statistics Express for 2011 issued by China Electricity Council, as at 31 December 2011, nationwide installed capacity reached billion KW, representing an increase of 9.2% over 2010; total power consumption throughout China reached 4.69 trillion KWh, representing an increase of 11.7% from last year. In the first half and summer peak period of 2011, power shortage occurred in Zhejiang, Jiangsu, Fujian, Hubei, Henan, Chongqing, Gansu and Guangdong, and power shortage nationwide amounted up to 30 million KW. In 2011, the Company experienced smooth development of power generation construction projects and increased its operating controlled and equity-based generation capacity by 4,761.5MW and 3,149.4MW, respectively, from newly installed generation facilities, including 3,120MW from coal-fired power generation units, 923MW from gas-fired power generation units, 698.5MW from wind power generation units, and 20MW from hydropower generation units. Given the change of generation capacities of some affiliates of the Company and the change of generation capacity from 29

30 technical renovation of existing generation units and closure of small generation units by the Company, the Company has had controlled generation capacity of 60,375MW and equity-based generation capacity of 55,350MW as at 20 March The Company is now one of China s largest listed power producers with power plants located in 19 provinces, municipalities and autonomous regions. The Company also has a wholly-owned operating power plant in Singapore. 1) Development trend in power generation market China is expected to maintain steady economic growth in 2012 to meet the 7.5% GDP growth target set down at the central economic work conference and the government work report, which suggests slightly decreased growth of the economy and power consumption. According to the forecast of China Electricity Council, China s power consumption is expected to increase by 8.8% to more than 5,000 billion KWH in 2012, with higher consumption during the second half of In respect of power supply, the newly installed generation capacity is expected to reach 85 million KW, including 20 million KW from hydropower and 50 million KW from coal-fired power. Total power generation capacity will be 1.14 billion KW by the end of 2012, with 4,750 hours of power equipment utilization and 5,300-5,400 hours of coal-fired generation equipment utilization throughout the year. According to information available, China may experience shortage of water supply before the flooding season, and regionally and periodically deficient coal supply in It is therefore estimated that regional, periodical and seasonal shortage of power supply will occur during 2012, with shortage might be as much as 30 million KW. After the rise of power tariff in 2011, all power producers have commonly realized to increase power generation as an effective measure to promote profitability, which surely will contribute to more intensified competition in the power market. 30